Monday, November 30, 2009

County Council Member Valerie Ervin, the Chair of the Council’s Education Committee, recently called MCPS leader Jerry Weast a “rogue superintendent.” That statement is a culmination of years of tension between the County Council and the school system that has been recently exacerbated by budget difficulties. All of that is threatening to erupt in an all-out battle with consequences for the county’s future.The immediate cause of this dispute is the county’s maintenance of effort (MOE) quandary. State law requires counties to spend at least as much local funding on education each fiscal year as they have the prior fiscal year. This year, Montgomery County asked the state for a waiver of that requirement in the amount of $79 million due to the poor state of the economy and the tax-limiting Ficker Amendment. The county’s Board of Education and Weast agreed with the grounds for a waiver and testified on its behalf. When the state denied the county’s request, the county arranged to give the school district the money to satisfy the state’s requirement, but took it back as a debt service charge for construction. Weast believed that the maneuver would apply just to one year, but the County Council refused to agree to that restriction. Weast then wrote State Superintendent of Schools Nancy Grasmick asking whether the county’s budget maneuver was legal, prompting an opinion by Attorney General Doug Gansler stating that it was not. That may subject the county to penalties ranging from $23-45 million in lost state aid. Weast then blasted the County Council in a statement that was sent to the media but not to the council, prompting Council Member Ervin, who oversees his budget, to denounce him as a “rogue.”

The immediate issue surrounding the penalty is pressing. The budget gimmick approved by the council sent $79 million to the school system so that that money could be used to pay off bonds to build schools. If the state’s penalty applies directly to the school system, it will likely be paid from the money that was to be used for the bonds. That would leave the county responsible for paying off those bonds from another source of money. But if the county makes the school system eat the money, the impact would be unpredictable.

All of this occurs in the background of severe budget problems. The county learned in November that income tax revenues due from the state are $85.2 million lower than originally projected. A County Council budget analysis states:

The total FY10 shortfall, based on the State’s new formula, could be in the range of $95 million, while the FY11 shortfall could be in the range of $110 million. These write downs alone could bring the County's estimated FY11 budget gap, which in September was projected at $364.4 million, to well over $500 million, despite the Council's November 17 approval of a $29.7 Savings Plan for FY10. Other factors could make the gap still larger.

In other words, no part of the county government has money laying around to pay off the penalty.

How did things get to this point? Multiple sources report that the school system offered the county a deal last spring to get around the $79 million MOE requirement. The terms of the deal were that the county would pay the schools the $79 million, but the schools would agree to hold the money in reserve. That money would then be available to finance next year’s budget. The reason that proposal fell apart was that many in Rockville did not trust Jerry Weast to sit on the money. And so the ill-fated budget gimmick was instituted, initiating the fall into the hole that the county now occupies.

That brings us back to a central factor that handicaps the ability of the county to respond to adversity: a basic distrust between Weast and some of the county’s elected officeholders. We’ll look more closely at that issue in Part Two.